Mayors advance pension reform plan

SANTA ANA (AP) — Mayors of five California cities have filed papers with the state to place an initiative on next year's ballot that would amend the state's constitution to allow local governments to negotiate changes in pension benefits for current and future employees.

The initiative would allow cities to scale back future pension benefits for current employees through union bargaining or by taking reforms to local voters. The proposal would not allow cities to touch benefits that current employees have already accrued, San Jose Mayor Chuck Reed said Wednesday. A number of cities struggling with skyrocketing pension costs have already sought to lessen their obligations by reducing pension benefits for future hires — but that isn't enough, he said.

"If you're making changes for future hires, the savings are way in the future. It takes years, many years, before the savings get to be significant but the problems are in the present and in the near future," said Reed, who added that San Jose's annual retirement obligations have increased $199 million since 2003. "You have to go where the significant costs are and that's with current employees."

The plan, which is also backed by the mayors of Anaheim, Santa Ana, San Bernardino and Pacific Grove, was swiftly denounced by public employee unions and drew resistance from the California Public Employees' Retirement System, which administers pension benefits for the state's public employees.

The initiative needs more than 800,000 petition signatures to qualify for the ballot and opponents promised to fight hard to keep it from becoming law.

In California, citizen-generated initiatives that gather enough signatures qualify for the ballot and can be voted into law.

The proposal breaks a promise made to public employees, including teachers, firefighters and police officers, when they were hired and attacks the so-called "vested rights" that are an integral part of the pension guarantee, said Steven Maviglio, a spokesman for Californians for Retirement Security, which represents 1.6 million public employees.

"This is pretty extreme," he said. "The kitchen sink and everything in the house will be thrown into this battle because not only does it undermine the retirement of a couple million Californians, but it also sets a terrible precedent for the future of collective bargain in the state."

In a statement, CalPERS said it was bound by both state and federal law to protect pension benefits and would "continue to support and defend our members' vested rights."

If it makes the ballot, the initiative promises to be hotly contested and followed in other states where pension costs have also come under scrutiny.

During boom years in California, cities and local governments padded their public employee contracts with increased pension benefits, but the recession brought the reality of soaring retirement obligations home. In many cases, public employees can retire at age 50 and receive a guaranteed pension worth 90 percent of their highest annual salary.

Retirement costs have contributed to bankruptcies in three cities — Stockton, Vallejo and San Bernardino — in recent years.